Pricing Uncertainty Induced by Climate Change
Open accessAbstract
Abstract Geophysicists examine and document the repercussions for the earth’s climate induced by alternative emission scenarios and model specifications. Using simplified approximations, they produce tractable characterizations of the associated uncertainty. Meanwhile, economists write highly stylized damage functions to speculate about how climate change alters macroeconomic and growth opportunities. How can we assess both climate and emissions impacts, as well as uncertainty in the broadest sense, in social decision-making? We provide a framework for answering this question by embracing recent decision theory and tools from asset pricing, and we apply this structure with its interacting components to a revealing quantitative illustration.
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- Authors
- Barnett, M., Brock, W., & Hansen, L. P.
- Affiliations
- Arizona State University (US)
- University of Missouri (US)
- University of Chicago (US)
- Corresponding author
- Hansen, Lars Peter
- Venue
- The Review of Financial Studies
- Publisher
- Oxford University Press (OUP)
- Published
- 2020-02-14
- Volume
- 33
- Issue
- 3
- Pages
- 1024-1066
- ISSN
- 0893-9454 (ISSN-L)
- 1465-7368
- OpenAlex
- W2978070827
- Cited by
- 467
- References
- 0
- Citations by year
- 2026: 61 · 2025: 97 · 2024: 86 · 2023: 68 · 2022: 49 · 2021: 64 · 2020: 28 · 2019: 6 · 2018: 1 · 2017: 3 · 2012: 1
- FWCI
- 46.23
- Type
- journal article
- Language
- en
- Open access
- hybrid
- doi.org
- Licence
- Locations
- Review of Financial Studies (publishedVersion, cc-by-nc)
- RePEc: Research Papers in Economics (submittedVersion)
- Knowledge@UChicago (University of Chicago) (submittedVersion)
- University of Chicago
- Funders
- Alfred P. Sloan Foundation (G-2018-11113)
- Research Computing Center at the University of Chicago
- Topics
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Climate Change Policy and Economics
- Social Sciences › Economics, Econometrics and Finance › Finance › Capital Investment and Risk Analysis
- Physical Sciences › Environmental Science › Global and Planetary Change › Climate Change and Geoengineering
- Keywords
- climate change, uncertainty pricing, emission scenarios, climate damage functions, asset pricing, decision theory, social decision-making
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